Big spend-up misses
chance for real reform

Courier Mail
27th October2005

By Des Moore

Des Moore says Peter Beattie's mini-budget is not all that it pretends to be.

The Beattie Government has responded to the exposure of a dysfunctional public hospital system by producing a mini-budget that claims improved performance will be achieved largely by increased spending on staffing and various medical services - but considerably exaggerates the extent of that increase.

Regrettably, the lengthy Special Fiscal and Economic Statement specifies no measures to effect much-needed underlying reforms.

Those should have included a reduction in the role and staffing of the existing highly centralised and bureaucratic administrative arrangements; a requirement that individual hospitals publish more on their performances; and the creation of a more competitive environment by giving greater autonomy to individual hospitals and increasing the contracting out of services to the burgeoning private hospitals sector.

Regarding increased spending, Premier Peter Beattie claims an additional $6.4 billion is being provided to Queensland Health over five years, but his claims actually relate to six years, including the current one. Yet the mini-budget itself provides data only for the four years from 2005-06 to 2008-09 and that shows new health funding is only $2.4 billion (this excludes contingent provisions for wage increases already included in the estimates).

Absent transparency for 2009-10 to 2010-11, guesstimates for the two years suggest that total new funding over the six years may be limited to about $4.2 billion. Naturally, this provides additional funding support.

However, the revised estimates show total health spending increasing at a slower pace than the projected growth of the Queensland economy over the period to 2008-09.

In short, whether viewed as an exercise in health reform or as a solution via spending, the mini-budget falls short. Of course, the Premier quotes with approval the Forster report assessment that Queensland has as good a health system as any in the country. But, if so, why has so much attention been given to the expenditure solution (sic)?

As pointed out in a recent article ("Cash injection not the answer", Perspectives, Oct 21), adoption of the Forster report proposals would have lifted hospital spending by less than the $431 million in new funding provided this year.

But Forster proposed an additional 4000 staff members over three years, compared with the Premier's planned addition of 1200 over 18 months. He must surely be disappointed that more attention is not given to basic reforms.

The mini-budget includes additions to infrastructure spending on a range of projects that, according to the Premier, increase the state's total capital program by $2 billion over four years.

Given that the latest Bureau of Statistics data shows such spending increased in real terms by only 2 per cent over the whole period from 1997-98 to 2003-04, these and earlier catch-up measures are not before time.

However, is the revised estimated increase of 37 per cent in capital expenditure by the general government sector achievable in 2005-06? Moreover, the opportunity was missed to announce a larger role for the private sector in the infrastructure program.

A major disappointment of the mini-budget (which incorporates an early mid-year budget review) is its revelation that the Government not only adopted measures to raise additional revenue but failed also to effect any net saving in operating expenditure.

Indeed, without the policy additions to net non-health spending of $200 million, there would have been virtually no reduction in the estimated operating surplus to $718 million.

It is difficult to believe that, in a budget with operating expenditure totalling more than $26 billion, it would not have been possible to find savings of, say, 2 per cent or about $500 million.

As previously pointed out, Queensland spending on general public services is about $500 million above the state's average and appears to include items ripe for pruning.

The combined effects of the spending and revenue-raising measures and mid-year review reveal only relatively minor changes in the state's overall budgetary and financial position in 2005-06. Contrary to the impression conveyed by the Premier that economic growth would fund much of the increased health spending, no change has been made to the forecast of 4.25-4.5 per cent growth in real GSP over the period to 2008-09.

However, with the revenue measures, total revenues are estimated to provide an extra $1.7 billion in this period, financing about 70 per cent of new health funding. It is the net additions to operating spending that have moved Queensland close to the position where its general government sector will rely on borrowings or the running down of assets to finance almost all its capital spending.

In the short term this is of limited concern, given that such assets exceed liabilities. The main concern with this mini-budget is its failure to promulgate basic reform.